Product Profitability Analysis Based on EVA and ABC

Chen Lin, Shuangyuan Wang, Zhilin Qiao

Abstract

On the purpose of maximizing shareholders’ value, the profitability analysis established on the basis oftraditional accounting earnings cannot meet the demands of providing accurate decision-making information forenterprises. Therefore, this paper implements the Activity Based Costing (ABC) and the Economic Value Added(EVA) into the traditional profitability analysis system, sets up an improved EVA-ABC based profitabilityanalysis system as well as its relative indexes, and applies it to the study of the capability of profitability. Theresults show that the improved system can minimize the impacts of accounting policies, objectively reflects theoperating performance of an enterprise, and provides more accurate information to decision makers.

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